July 9th, 2019

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This is a bill you may want to pay extra attention too (and no, we’re not talking about phone bills here). We’re talking about H.R. 3141, “The FHA Loan Affordability Act of 2019”, which just made its way through the House Financial Services Committee. The bill, introduced by Rep. Dean Phillips (D-MN) and similar to bills that have previously been proposed, aims to make FHA loans more affordable to consumers by repealing the Life of Loan policy for mortgage insurance. As of now, the MIP payments on an FHA-backed loan remains on it for as long as the borrower has the loan. However, this bill would eliminate that policy and replace it with a policy that would drop MIP payments as soon as the outstanding loan balance hits 78% of the home’s original value. Interestingly enough, this is actually how FHA loans used to be until it was changed in 2013 to help boost the FHA insurance fund. Now that the fund is at a healthy level, lawmakers are looking to change the rule back in order to help make housing affordability easier on homeowners. One major group that is backing the bill, the Community Home Lenders Association, had this to say: “The Life of Loan factor can tilt a borrower to a refinance out of FHA and into a conventional loan, even when the savings are limited and the traditional wisdom about refinancing calculations argue against a refinance. The result is that FHA loses many seasoned loans, along with the revenue that goes with those loans.”

Next, the bill will go to the House to be yea’d or nay’d.